Fears that global food prices will rocket at the end of the year following a poor United States harvest were heightened this week.
Fears that global food prices will rocket at the end of the year following a poor United States harvest were heightened this week after predictions that a drought across the Midwest is expected to continue for at least another seven days.
Maize yields were already suffering because of a long drought that hurt the crop in its critical pollination phase, experts said, as the price of Chicago new-crop maize jumped more than 3% to its highest level since October last year.
Soya bean crops and the crucial wheat harvest are also expected to suffer from the blistering heat, which has stayed in the high 30°C region for much of the past few months.
A repeat of the drought in 2010 in another important wheat-producing country, Russia, which saw food prices rise in Europe, is likely to make the situation worse.
The major soya bean producers Brazil and Argentina have also suffered because of poor weather conditions.
The US government played down the extent of the problem and produced figures showing farmers planted more fields of maize and soya beans, which it said should offset the fall in crop yields.
Commodities strategist
But traders argued the drought was serious and likely to push up prices further. The Chicago Board of Trade December maize contract rose 3.2% to $6.55 a bushel, whereas November soya added 0.7% percent to $14.38 a bushel. September wheat gained 1.2% to $7.66 a bushel. US December jumped almost 15% last week, September wheat gained more than 10%, and November soya beans added nearly 4%.
Luke Mathews, a commodities strategist at the Commonwealth Bank of Australia, said: “Hot, dry weather across the US and the declining yield potential is driving the increase in corn today.
“Wheat is being dragged along by the strength in corn, like soya beans, too,” Mathews said.
Crop forecasters have been reducing their estimates on US maize crop output following the hot and dry weather.
Private analytical firm Informa Economics lowered its forecast of the 2012 maize yield to 154.9 bushels an acre (0.405 hectares) from its June 15 projection of 163.4, trade sources told Reuters.
As a result, large speculators bolstered their bets on further rises in prices.
Hedge funds have become key speculators on commodity prices in recent years and data supplied by the Chicago board showed they and other firms spent the last week betting prices were set to rise.
The long-range forecast offered some mild relief as cooler weather is expected next week in the US grain belt, accompanied by some rainfall in the south, Reuters reported.
But it would arrive too late to save some of the already damaged maize crop, an agricultural meteorologist said.
Don Keeney, meteorologist for MDA EarthSat Weather, said: “The six- to 10-day is wetter for the southern Midwest and Delta, not excessively wet, on the order of 0.50 inch [12.5mm] to one inch [24.5mm]of rain is possible,” he said. – © Guardian News & Media 2012